Goldvybe writes: While I primarily analyze and trade gold, I do tend to look at the action in silver as the sister metal can provide us with some very interesting clues about where gold is headed next. Over the years the Commitment of Traders (COT) report which is released at the end of each trading week by the CFTC can alert us to some very interesting developments in the precious metals markets.

The one observation that I have had over the years is that when looking at the COT reports, silver tends to clearly mark very important turning points at intermediate tops. While gold also exhibits this behavior, it shows up in Silver much more clearly due to the fact that the silver market is a much smaller market compared to gold. As of the latest COT report released on Friday, February 19th, it shows that the commercial hedgers (most commonly known as the silver producers and bullion banks) have put on a staggering 70,000 contracts short in the COMEX SI contract.

The last major top in Silver which was in late-October of last year, the commercials had put on about 60,000 contracts short just before the silver price plunged $2 lower by early-December. So our expectation here is that both gold and silver are gearing up for a decline into the March/April timeframe as we have been expecting. However, silver has much more work to do versus gold as it is still exhibiting a series of declining tops which is clearly evident in the chart above. In my view, Silver should correct down into the $14.00-$14.25 range in the coming weeks.

As long as silver can hold $14.00 and the commercials begin to cover their short positions thereafter, we should finally see silver take off and breakout over its declining structure. Now silver tends to show a seasonal tendency to rally in the late-March into April/May timeframe so this would be the ideal time for silver to buck up and show more bullish behavior just as gold has started to do.

By Goldvybe

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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